IN APPROVING CLASS SETTLEMENT, DALLAS FEDERAL JUDGE DETERMINES POLICY PROCEEDS FROM POLICY ARE PROPERLY ALLOCATED

As part of an extensive and detailed order last week approving a $1,520,000 “limited fund” class action settlement, Senior District Judge Royal Furgeson of the Northern District of Texas was required to determine whether the defendant’s liability coverage was properly allocated.  In Stott v. Capital Financial Services, Inc., No. 3:11-cv-2073-F, 2011 WL 4047666 (N.D. Tex. Sept. 12, 2011), a proposed class settlement included $120,000 from the defendant and $1.4 million from the defendant’s liability carrier, which constituted the remainder after defense costs of a $2 million sublimit of the defendant’s $5 million policy.  Judge Furgeson was not convinced by the insurer’s contention that all of the class members’ claims were “related” so as to be subject to the sublimit.  However, the judge noted that other litigation involving the same defendant and policy were pending before his court.  He stated that he was “well aware of the need for other portions of the policy to be devoted to claims” asserted in the other cases.

While the Judge did not base his ruling on the carrier’s argument that the claims were “related,” he stated that the carrier would have a substantial chance of success, and would delay the plaintiffs receiving at least some compensation for their losses.  The court also noted that because the policy was a wasting policy, additional litigation would likely reduce the amount class plaintiffs’ recovery.  Thus, the judge concluded that the $1.4 million remaining from the subpolicy was a proper amount for the “limited fund” settlement.